publication

Investment Opportunities in Climate-Positive Smallholder Dairy Development

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Citation

Rockeman, K, Bowman, R 2024. Investment Opportunities in Climate-Positive Smallholder Dairy Development.

Unlocking Climate Financing for Smallholder Dairy Transformation

Introduction

This case study explains how a smallholder dairy development project might be designed for climate change financing, and what is needed to verify the potential impact of changes in productivity and enteric methane emissions.

Predictive models such as the Global Livestock Environmental Assessment Model (GLEAM) or Lifecycle Analysis (LCA) start with assumptions regarding the relative mix of production systems and animal characteristics in a given geographic area. They are then combined with secondary data to generate an estimate of current productivity and methane emissions. Diagnostic methodologies such as AMS-III.BK, which measures how strategic feed supplementation could increase smallholder dairy productivity, start with a survey of the area to determine the prevalence of animal characteristics and production systems, using that information to calculate precise values for dairy productivity and methane emissions.

This brief outlines how changes can be calculated using the AMS-III.BK methodology approved by the United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism (CDM) Executive Board in 2014. It is a peer-reviewed and internationally approved methodology for baseline methane measurement and verification from smallholder dairy production and is accepted for use in verifying carbon credits.

AMS-III.BK has been operationalized in the Ruminant Methane Assessment (RMA) tool.  The RMA is a suite of applications that produce calculations and measurements far more accurate than estimates based on assumptions using secondary data modelling exercises.  They apply UNFCCC approved statistical methodologies to determine the appropriate sample size needed to establish statistically significant baselines and measure annual change in beneficiary populations. However, survey instruments must be used to obtain the detailed, objectively verifiable data at the farm level needed to calculate changes in productivity and methane emissions.

Diagnostic applications can be adapted to a wide range of ruminant production systems and project interventions and can be used to identify weak links in livestock production systems, calculate the potential effect of various technical interventions, and attribute the impact on productivity and enteric methane emissions.  We can confidently present these applications to potential climate-change investors interested in financing practical, results-oriented activities yielding carbon credits.

Producing more milk with less impact

Background

An estimated 12 to 14 percent of the world’s population, or 750 to 900 million people, live on dairy farms or within dairy farming households.  The mean dairy herd size is around two cows producing on average less than 1,000 litres of milk per year. This is less than half the production which could be produced by these same cows with proper feeding and management practices. This low level of productivity/cow, combined with high levels of methane intensity, has remained unchanged in Low- and Middle-Income Countries (LMICs) over the past 50 years.

Climate impact of smallholder dairies

Smallholder dairy operations suffer from chronically low levels of productivity and emit high levels of methane per liter of milk, especially when compared to the inherent potential available.  But small-holder dairy production can be very climate positive IF properly managed.  The Endline Methane Assessment of KCDMS Dairy and Fodder Value Chain Activities used the Ruminant Methane Assessment (RMA) tool and documented a 47% increase in dairy productivity combined with a 27% decrease in methane emissions intensity from 2019 to 2022 in the areas studied as a result of the project.

Problem statement

Animal nutrition is the single greatest constraint to increasing dairy productivity and reducing high methane emissions intensity.  But applied nutrition and ration balancing are almost universally ignored.  As a result, smallholder producers generally do not understand or apply basic nutrition principles, and lack the access to practical advice needed to:

  • Properly feed their animals;
  • Identify and address nutritional problems; and
  • Reduce ruminant methane emissions intensity.

However:

  • Proper feeding and improved nutrition do not necessarily require additional farm-level investment.
  • Producers can be taught to make the most effective use of the feed resources at hand.
  • Improved feeding and management practices yield substantial results.

This combination of factors makes mitigating enteric methane emissions in livestock projects a win-win-win proposition for producers, governments, and global environmental health.

Win for the producerWin for the countryWin for the world

Increased smallholder dairy   production

Effective, sustainable use of natural resource (land, water) utilization

Improved child and maternal nutrition from increased access to and availability of animal source food (ASF)

Greenhouse gas mitigation

Sustainable use and improved management of natural resources

Increased household incomeSustainable dairy sector growthIncreased environmental responsibility

 

Potential impact

Diagnostic surveys in several East African countries, most recently in Kenya and Ethiopia, have identified great potential for methane mitigation projects targeting improved smallholder dairy husbandry.  Based on that work, the potential impact of climate finance investment in private extension/embedded services delivery through producer cooperatives, milk processors, feed mills, etc. could yield the following:

Kenya: A dairy husbandry project targeting approximately 40,000 cows could be expected to yield annual benefits of:

  • 20 million more litres of milk produced;
  • producer incomes increased by over USD $7 million;
  • 1,200 metric tonnes CH4 (equal to 33,600 tonnes of  CO2 equivalent) mitigated; and
  • CO2e mitigation valued at USD $400,000 in the voluntary market

Ethiopia: A full dairy nutrition project targeting approximately 20,000 cows could be expected to yield annual benefits of:

  • 74 million more litres of milk produced;
  • producer incomes increased by over USD $33 million;
  • 1,100 metric tonnes CH4 (equal to 30,800 tonnes of COequivalent mitigated; and
  • COequivalent mitigation valued at USD $300,000 in the voluntary market.

Methane mitigation verification

Verifications of methane mitigation require an approved methodology for precise calculation of changes in productivity and enteric methane emissions. An example is the AMS-III.BK methodology approved by the United Nations Framework Convention on Climate Change (UNFCCC) CDM Executive Board in 2014. This is a peer reviewed and internationally approved methodology for baseline methane measurement and verification from smallholder dairy production activities and is accepted for use in verifying carbon credits.

AMS-III.BK has been operationalized in the Ruminant Methane Assessment (RMA) tool.  The RMA is a suite of practical applications that produce calculations and measurements that far more accurate than estimates based on models that use secondary data and assumptions.  Applications use UNFCCC approved statistical methodologies to determine the appropriate sample size need to establish statistically significant baselines and measure annual change in beneficiary populations. They consist of survey instruments that obtain detailed, farm level, livestock production data, and a software and database programs that processes this information to identify nutritional constraints, actual levels of productivity, and methane emissions. Such approaches calculate productivity and methane emissions using objectively verifiable data collected at the farm level.

Project development

The steps required to develop a methane mitigation project yielding carbon credits are as follows:

  • Identify the potential project zone in consultation with stakeholders.
  • Conduct a baseline assessment to:
    • determine current levels of methane intensity,
    • identify weak links in the production system and how to correct them, and
    • calculate the methane impact of correction.
  • Design the project detailing the interventions to be employed and how they will be delivered.
  • Establish the implementation timeline for five years, the minimum time required to impact livestock production and take advantage of the multi-year stream of benefits.
  • Track annual results using the approved methodology to verify the impact of results-based climate change financing.

Investment required

The investment required for results-based financing depends upon country specific conditions.  These include the planned scale of the intervention, the corrective measures to be employed, and specific implementation arrangements.

The first two steps outlined above, which will identify and survey a statistically significant sample of producers, will cost approximately $120,000 and result in the “blueprint” for a carbon financed project.  The implementation budget will vary based on such things as: scale (the number of animals targeted), the cost of different interventions, and methane mitigation potential

The examples described above are based on recent assessments using AMS-III.BK in East Africa. Similar methane assessments in Latin America and Asia have yielded similar results.

Acknowledgments

This document is the result of a collaborative effort of the LD4D Solutions Group on Climate Finance & Livestock. Lead authors: Kurt Rockeman and Richard Bowman (RuMeth International Ltd.). We gratefully acknowledge the feedback of Frances Siobhàn Ryan (SEBI-Livestock) and Bernard Kimoro (Government of Kenya).

The LD4D Climate Finance & Livestock Solutions Group brings together decision-makers and experts to generate evidence-based insights that help livestock development projects access climate finance. The group aims to unlock much-needed funding for a sector that is currently underrepresented in climate finance - despite its crucial role in adaptation and mitigation.

Livestock Data for Decisions (LD4D) is a worldwide community of over 1,000 members and partners working to improve livestock data and evidence in low- and middle-income countries. LD4D aims to support the transition to more sustainable and inclusive livestock systems by mobilizing trusted livestock data for better policies, investments, and strategies. Learn more at livestockdata.org.

This work is licensed under Creative Commons Attribution-NonCommercial- NoDerivatives 4.0 International. To view a copy of this license, visit https://creativecommons.org/licenses/by-nc-nd/4.0/. September 2024.

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